Jul. 7, 2014

5 Must-Know Tips to Prevent Corporate T&E Fraud

With employee travel and entertainment (T&E) spending accounting for up to 6% of total corporate costs and continuing to increase, it's wise for companies to monitor T&E spending. Lack of careful T&E oversight can open the door to fraud, policy violations and corporate waste. Consider the below tips to keep your corporate T&E spending in check and your expense reporting processes easier for employees.

USE RECEIPT LIMITS AS AN OVERALL INDICATOR

The IRS requires receipts to have a value of at least $75, but a more common limit for most companies in the U.S. is $25. Violations within the receipt limit policy are not likely to account for a large proportion of T&E spending, but they are worth monitoring because of their predictive value. Companies with high rates of receipt limit abuses are also likely to see a high amount of T&E waste.

ONLY PAY ONCE FOR EXPENSES

Good expense management software can easily identify an expense listed multiple times on the same expense report but an expense that is listed on separate reports is not as easy to detect. The expense might be submitted on two reports by the same employee or the same expense could be submitted by two employees on their individual reports.

An employee might claim a restaurant dinner on an expense report immediately upon returning from their trip. At the end of the month when their credit card statement arrives, they forget submitting this expense previously and submit it again. Another example is two employees sharing a taxi. One may pay for the taxi with the company’s credit card and submit it as a credit card expense while the other might submit the claim on a separate report as a cash expense.

PAY ATTENTION TO RED FLAGS

Cash payments can be necessary on a business trip. Not every business will accept a company credit card and not all payments lead to receipts so a business traveler could take advantage of this for personal gain. For example, they can use their own credit card to obtain rewards points or they can try to get around a non-compliant merchant category code that has been blocked by using cash and then requesting reimbursement. Monitoring expense reports for a higher-than-expected proportion of out-of-pocket spending and checking for out-of-pocket expenses with the same date and charge as previously submitted expenses on other reports will help identify and avoid this type of fraud.

CLASSIFY EXPENSES PROPERLY

This task is easier with expense reporting software that captures photographed or scanned receipts and provides electronic reports and drop-down menus that offer proper expense classifications. There still can be intentional or unintentional selection of incorrect categories, however. Misclassification of expenses can affect IRS tax deduction eligibility, incorrectly classify the distribution of spending, and mask non-compliant company expenses.

KNOW EXPECTED HOTEL AND MEAL EXPENSES

Have a general idea of what is normal for a city’s hotel and meal costs, and investigate outliers. A good expense reporting system like Chrome River EXPENSE will catch any overages and ask the employee to justify the expense before it is approved. Keep in mind that some travelers like business development or sales representatives may need to spend more to treat clients or prospects to meals that help build long lasting relationships and ultimately close sales.

Our choice of Chrome River EXPENSE was made in part due to the very user-friendly interface, easy configurability, and the clear commitment to impactful customer service – all aspects in which Chrome River was the clear winner. While Chrome River is not as large as some of the other vendors we considered, we found that to be a benefit and our due diligence showed that it could support us as well as any large players in the space, along with a personalized level of customer care. Sally Abella, Director of Corporate Travel Harman International

We are excited to be able to enforce much more stringent compliance to our expense guidelines and significantly enhance our expense reporting and analytics. By automating these processes, we will be able to free up AP time formerly spent on manual administrative tasks, and enhance the role by being much more strategic.
Ben Zastrow Zelle